"De-growth" or how Greens think drinking less take-out coffee is an economic policy

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The Greens and their associated useful idiots are a pretty strange bunch. But nothing is stranger than when these good, kind and utterly barmy people start talking about work:

“Why do we work? What do we do with the money we earn?” asks Anna Coote, head of social policy at the New Economics Foundation. “Can we begin to think differently about how much we need—to get out of the fast lane and live life at a more sustainable pace, to do things that are better for the planet, better for ourselves?”

Now I'm not sure how many hours Ms Coote puts in or precisely how much she gets paid to spout this sort of stuff. But I'll guess that her take home pay is a damn sight more that the average pay for the average British worker.

And here lies the problem. I once had a conversation with a hairdresser about his business. He wasn't moaning just making the matter-of-fact observation that, with the shop open long hours, the time spent managing stock and staff plus the time at home in the evening book-keeping, paying bills and planning, his hourly income was below the minimum wage.

If Ms Coote and her sort - comfortably off, employed people - had their way, the cost of basic things like having your hair cut or the windows cleaned would soar. Even worst people would have us believe that somehow we can get out of the fast lane - presumably while they carry on with big salaries and pleasant jobs, the rest of us can lump it on less money.

Such people - when they aren't weeping crocodile tears about 'the poor' - believe that every job is like theirs. The sort who subscribe to Sierra Magazine where they suggest:

"...you move to a smaller house or an apartment, downsize to one or no car, or simply have fewer lattes to-go, a smaller paycheck could reduce consumption overall...” 

Isn't that lovely! We're going to save the planet by having fewer take-out coffees! These people really do live in a bizarre otherland. OK it's not quite living in teepees and growing organic vegetables. In fact it's probably worse because it implies some sort of moral urbanism exists in the green mind - presumably because the core constituency for modern greenery is decidedly urban and hipsterish. It's more about planting herbs in gutters than a return to the land.

Now don't get me wrong, I'm not against down time - all work and no play does make for a dull life. But the idea that there is some sort of Malthusian imperative requiring "de-growth" is ridiculous. If people only want to work 20 hours a week that's fine by me and I hope they enjoy the free time but don't try to pretend that your different lifestyle is somehow not consumption, somehow superior to those folk who like a take-out latte and a shiny new car.

What Ms Coote and her friends fail to appreciate is that by stopping all their consumption they end all those businesses, all those jobs that serve such sinful indulgence. All the baristas, the car salesmen, the brewers and cake makers - gone. And with less money circulating that means lower tax revenues - less money to sweep the streets, teach children and care for Ms Coote's elderly relatives.

If these ideas come to pass we'll be less healthy, less happy and live shorter lives. But we'll have saved the planet!

As I said these people are utterly barmy.

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NEF talking rubbish about rubbish...

View from the top of the restored Manywells landfill, Cullingworth

A consultant to the New Economics Foundation writes about Biffa's problems. And manages to entirely miss the point - or demonstrate having done any research into the company.

Biffa, the waste disposal company that carries out much local authority work, is profitable, admired by the unions that represent much of its 6,000-strong workforce, praised by local authorities like south Oxfordshire district council as innovative and efficient, and responsible over the years for developing a lot of the improvements that have spruced up UK rubbish collection and recycling.

Lets get some things clear about Biffa. For sure it does a lot of local authority work - outsourced contracts of one sort or another up and down the land. But this isn't where it has made its money - it makes that from filling up holes in the ground with rubbish not from collecting said rubbish from your doorstep. And while I applaud left-wing (so-called) economists when they enthuse about outsourcing, they really should check the facts first.

The cause of the problem? Here's a clue from a Telegraph report:

Biffa is more exposed to industrial waste, which makes up 80pc of its business, than municipal waste. The shift away from landfill and towards recycling has compounded its problems.

Trading has been made more difficult, too, thanks to a Government tax hike on companies still reliant on landfill, and the trend for big companies, such as Tesco, to deal with their own waste.

Last week HMRC closed a Landfill Tax loophole, which is expected to add extra strain on the company. 

Far from the company's problems being a consequence of evil capitalists, they are largely down to the ongoing landfill tax escalator - a rising charge on landfill intended to shift disposal away from holes in the ground and promote recycling. I'm sure NEF approves!

The NEF consultant wants "us" (I guess she means the government using taxpayers' money) to protect Biffa from these awful capitalists. We should have a plan (quite what it is the writer is unclear about). And we should learn:

The Biffa case study shouldn't be wasted. It is an object lesson in how we have let the market run our real economy – rather than, as it should be, the other way round.

Read this sentence a few times. It is a straightforward argument for "us" (the state, I guess) organising the "market". It is utter rubbish - Biffa's problems are a consequence of bad management (borrowing too much against future earnings) and government policy (making it uneconomic to stick rubbish in holes rather than burning it or recycling it). Nothing at all to do with "the market". Nothing.

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A special thank you to the Adam Smith Institute for exposing more NEF nonsense.

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As you know, dear reader, the New Economics Foundation is one of my very favourite institutions - a source of endless 'hand-to-face' moments, squeals of delight at ignorance and general 'do these greenie lefies really believe that' occasions.

It seems I'm not alone and the venerable Adam Smith Institute gets a similar pleasure - here commenting on NEF's solution to the housing supply problem:

Well, if you work for the nef, you suggest that taxation on property development should be raised. Quite ignoring that taxing something produces less of it. You then insist that private sector organisations shouldn't be allowed to get planning permission. No, really, reducing supply is well known to reduce prices, isn't it? Finally, we'll bankrupt most of the current developers by taking away their land banks which already have planning permission.

Oh, and joy of joys, they also reinvent the collaterialised debt obligation (CDO)* but this time it's the government's housing benefit payments that provide the collateral.

Great stuff.

*CDOs were at the bottom of the the foetid pile of dingos kidneys that is the US banking system, since you ask

Multipliers, markets and why the New Economics Foundation make me cross

The frighteningly bright Jon Beech has challenged my frothing rant about the New Economics Foundation and indeed my contention that much of their economics work is “evidence-free”. In doing this Jon provides what I find a very helpful positioning of NEF:

NEF's primary agenda is to counter the consumerist agenda that's piped out through radio TV etc, and to help people to reflect on what their relative wealth actually buys them: neuroses and over-leveraged anxiety. They question the economies of scale which result in uninterested interest.

Now were NEF simply engaged on a moral crusade then that would be a fair position but they are clearly positioned as researchers engaged in a scientific (in so far as we can call economics science) process. Which – as I said in my rant - requires evidence. And science, being the troublemaker that it is, evidence means empirical study. It means the raising and subsequent testing of hypotheses. And this NEF does not appear to do. It isn’t sufficient (and this applies as much to those who prefer a libertarian analysis to a statist analysis) simply to select the statistics you like, find a few quotes and cite your own earlier work. Unless of course you're a simple blogger like me!

Let us take just one of NEF’s “products” – LM3:

LM3 was developed by NEF (the New Economics Foundation) as a simple and understandable way of measuring local economic impact. It is designed to help people to think about local money flows and how their organisation can practically improve its local economic impact, as well as influence the public sector to consider the impact of its procurement decisions. It was designed to be quick and relatively easy, and to highlight where an organisation can improve its impact.

This is presented as an econometric tool (indeed I used it in my MSc dissertation) for assessing local economic impact but it is very difficult to track back to the theory underlying the model or indeed to find whether NEF actually undertook robust, peer-reviewed tests of its validity before launching it (with the accompanying consultancy offer) onto a credulous public. And where it has been tested this is what we find:

Notwithstanding this conclusion, difficulties in data collection combined with inaccuracies inherent to the LM3 process created a large margin of error in the findings.

And this is before we have considered the theoretical critique of the Keynesian multiplier. So apologies for getting all academic for a minute:

The multiplier is a central concept in economics and especially regional studies where it is widely used to assess the long term impact on employment and output from different forms of investment. As such it represents a significant part of the Keynesian aggregate demand model of the economy and can be described as the impact of the marginal propensity to consume (mpc) on a given investment or expenditure where the higher the level of mpc the bigger the multiplier (Heertje & Robinson, 1979).

The problem is that measures of the multiplier do not take account of the input source (i.e. where the money is earned) and that it is very difficult to define what we mean by “local” or “local economy”. This is significant since by applying the LM3 model to public expenditure we do not take account of the opportunity costs associated with that public spending (i.e. what the taxpayer would have spent it on had it not gone in tax). With the result that:

It is quite misleading to leave public policymakers with the notion that their spending is not at the expense of the private sector because it may be autonomous or have multiplier effects

None of this intended to say that Keynes was wrong about the multiplier (although there is plenty of doubt about his arguments in this respect) but to point out that NEF appear not to have been rigorous in their appraisal of LM3. Or rather that I cannot find any peer-reviewed, critical appraisal of their model – there is nothing evident from their website and my (limited) searches find very little published work applying the LM3 model in an academic research setting. Even in NEF’s own published work in my area of specialist interest – street markets – there is only an assessment of inputs (how much consumers spend) and no evidence of how that money then flows (e.g. derived from sales figures, margins and staffing costs of market traders). I happen to agree with NEF’s conclusions about the negative job impact of supermarkets but then so does almost every piece of independent economic research which doesn’t excuse NEF from skimping on the evidence.

This is just one of NEF’s products – I cannot comment on other products or reports – but to me it suggests that Jon is right in suggesting that this think tank sees its role as challenging the moral basis for consumerism and perpetual growth rather than providing a substantial and robust evidence base for us to understand how an alternative might work.

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NEF and George's medicine - more evidence-free economics from the masters...

George plans his spending cuts

Now as you know dear readers I am an especial fan of the New Economics Foundation. Their brand of greeny-greeny, evidence-free economics with a twist of Keynesian nonsense, is just what I need to reassure me that my ever so slightly grumpy view of economics is right.

Today – courtesy of New Start – I stumbled across the opinion of this august body of mythic thinkers on the “cuts”.

Andrew Simms, policy director at the New Economics Foundation, said: ‘George Osborne is set to apply the economic equivalent of medieval medicine to the UK economy. Unfortunately bloodletting an already ailing patient is unlikely to improve their progress. To strengthen the economy and make it more resilient and fit for current challenges, we need to invest comprehensively in new low carbon infrastructure. This modern medicine will improve security, create jobs and boost the economy.’

Now leaving aside the image of George Osborne as some form of hedge witch administering a tincture of wood sorrel and elderberry to the ailing British economy, I am struck by the transference implicit in NEF’s argument. For it is the green economists who prescribe medieval remedies for modern ailments – indeed, NEF’s economic ideas has about as much link to the science of economics as homeopathy does to the effective practice of medicine.

After all this is the organisation that thinks we can get by with only working three days a week (I vaguely remember those days – happy ones for an eleven year old but less happy for older folk), who think that jobs aren’t created by enterprise but by the magic of public sector intervention and who persist in misunderstanding the Keynesian multiplier. I could go on to talk about how NEF believe there’s another credit crunch on its way and how Britain should be more like poverty stricken Ecuador. All in all a fine bunch of pseudo-economists (remember this is “new” economics so it can ignore nearly 200 years of evidence, research and study).

When we get to the crunch, NEF are simply a bunch of socialists and peddle the same tired (and disproven) solutions as all the socialists of past times. Despite its low-carbon tinge NEF’s economics is more red than green and its application would represent a huge leap backwards to a protectionist, interfering, over-taxed, over-regulated and producer dominated economy. The sort of economy that nearly ruined Britain in the 1970s. That NEF want investment to be in a “low carbon infrastructure” is irrelevant – this is just repeated the disasters of socialist capital investment led, import substitution strategies.

But then, like Gordon and the Labour Party, NEF have a money tree…

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Try talking about a three-day week to the small business owner!

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I have been pondering how I might comment on “21 hours”, the latest piece of “research” from New Economics Foundation – who are to economics what homeopathy is to medicine.

This evening as I walked through Bingley, the real truth came to me. I walked – at about 6.15pm – past Ophiuchus. Run by Donna and Oliver, this is a hairdresser. And it was open. I wondered what this couple would think about:

“A ‘normal’ working week of 21 hours could help to address a range of urgent, interlinked problems: overwork, unemployment, over-consumption, high carbon emissions, low well-being, entrenched inequalities, and the lack of time to live sustainably, to care for each other, and simply to enjoy life.”

I suspect the answer would be somewhat a somewhat bemused shrug. After all let’s look at Donna & Oliver’s work:

*The shop is open six days every week – seven days during busy times such as approaching Christmas or before the school summer holidays

*Most days someone – usually either Donna or Oliver – is working from 8.30 in the morning through to 6.30pm or even later if there are still customers

*When the last customer’s hair is finished there’s the shop to clean, tidy and lock up – another half hour each day

*And then there’s stock to order, books to keep, tax and VAT forms to fill, staff to manage and tradesmen to arrange

Assuming it’s a normal week, Donna and Oliver probably clock up 100 hours working. And it’s stressful – margins are tight, business is tough and there’s plenty of competition. And on top of this Donna and Oliver have two kids – who have all the demands and needs you’d expect of young children.

Talking about “21 Hours” is an insult to these hard-working, decent, caring people who happen to have made the life choice of running a small business. The “21 Hours” idea is the product of people who have no clue why people work, what business is about or how the normal life of normal people operates.

We’d all like the “good life”. But some – like Donna & Oliver know it only comes from hard work, effort and good service. So New Economics Foundation, you know where you can stick your “21 Hours”?

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